What are the closing costs of a mortgage (closing costs)

Buying a house in the United States is not a simple or cheap process, that is no secret to anyone. If you are thinking of acquiring a property, you should worry about having the down payment (10% or more) and assume the mortgage closing costs.

We will talk about these additional fees in this article.

Why do I have to pay closing costs?

Mortgage closing costs are a series of commissions related to the sale of real estate that are assumed by both the owner and the buyer.

These charges vary based on the type of home loan, the property you decide to buy, and the laws of the state. The moment of closing or closing is when the transfer of title from the owner to the new owner is made, in which the mortgage loan that is used to make the payment is formalized.

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• Deadline: 30 years

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Between the closing costs most common you will find the title research, title insurance, attorney fees, taxes, lender charges and the property insurance, which is paid before closing the deal.

Some are non-negotiable, such as taxes local transfer or registry. Others, like bank commissions, can be negotiated. You can also work out a deal with your landlord or lender to have them cover a portion of your closing costs.

The most common mortgage closing costs

According to the rule, buyers must receive an estimated mortgage loan budget 3 days after the application is approved, which contains the closing costs.

Then 3 days before closing, you should have in your hands the closing statement, an account statement that tells you the final details about the mortgage and the closing costs.

The closing fees They are divided into 3 main sections: Prepaid Costs, Title Fees, and Lender Fees. We will review each one below:

• Title fees (Title fees). They typically make up 70% of expenses related to closing costs. That's why we recommend comparing these services so that you can save money on your title search, title insurance, and settlement.The bank requires insurance for the requested amount of the mortgage and we recommend another optional insurance to protect your investment in the property. This covers you against claims for possession, a home lien, unpaid jobs, and for taxes omitted by the previous owner.
• Prepaid costs (Prepaid fees). It is common for the lender or financial institution to ask you to open a deposit or guarantee account in order to collect property taxes and homeowner's insurance. During closing, you will have to pay out 1 year of insurance and 2 months of premiums as a reserve.In addition, you have to pay 2 to 6 months of taxes depending on when the account is due, which can be very expensive depending on the location of the property. Sometimes if you put a down payment of 20% or more, you could receive an exception to these charges.
• Lender commissions (Lender fees). It is undoubtedly the broadest category because it is the guarantees requested by the financial institutions that give you financing. Often times, they can be brought together in what is called an origination fee.This concept groups costs related to: appraisal, administration, processing, credit check, flood certification (if necessary), mailing, transfer taxes and deeds. In addition, you will find options such as mortgage discount points.

Closing fees for sellers

Homeowners who decide to sell their homes are also subject to various fees for these transactions. The most expensive is real estate commission, a split between the buyer's agent and the sales broker, which is usually 6%, but ranges from 5 to 8%.

In addition to paying the cost of the title, the owner must pay the “transfer tax", Which can vary from 1 to 2 USD for every $ 500.

Example of mortgage closing costs

Since we have the main fees they can charge you, we will take a simple example to illustrate what it could cost you. Suppose for a moment that you take out a mortgage loan for $ 162,000 with a fixed interest rate of 3.875% and you paid a down payment of 10% or $ 18 thousand.

When we process this data, we obtain the following:

• Bank or Lender Fees: $ 1,802
• Third-party commissions (appraisal, taxes, etc.): $ 3,870
• Prepaid costs and owner payments: $ 2,382
• Total: $ 8,054

This is just a basic part of the closing costs that we hope can give you a more precise idea about what it means to buy a house or apartment through a mortgage.

The most advisable thing is to have estimated funds, to rely on the Business Blog comparator to find the most attractive home loans and manage your finances well.